A business will find it profitable to hire workers up to the point at which:
A)marginal resource cost equals the wage rate
B)the wage rate equals product price
C)marginal product equals marginal revenue product
D)marginal resource cost is equal to their marginal revenue product
E)marginal resource cost exceeds the wage rate by the largest amount

Question

Quizplus · Accepted Answer

Marginal resource cost (MRC) measures the additional cost a firm faces when it hires an additional unit of a resource (e.g. labor). The marginal revenue product (MRP) measures the additional revenue a firm generates by hiring an additional unit of a resource. A profit-maximizing firm will hire workers up to the point where MRC equals MRP, because beyond that point the cost of the worker exceeds the revenue generated by the worker. Therefore, answer D, where the firm hires workers up to the point where marginal resource cost is equal to their marginal revenue product, is the best choice.

A Business Will Find It Profitable to Hire Workers Up